New data cast doubt on house price falls

The outlook for UK home prices was muddied on Friday by the release of official Land Registry data indicating that values have fallen far less than the high-profile Halifax and Nationwide surveys suggest.

According to the Land Registry, house prices in England and Wales were down only 0.6 per cent on the month in July, and down only 2 per cent on the year.

Although the annual drop was the highest since the series began in 2000, it is far lower than the double-digit declines for the UK shown by Halifax and Nationwide, the country’s two biggest mortgage lenders.

The differences persist even after allowing for the fact that the Land Registry does not include Scotland and Northern Ireland.

Selwyn Lim, managing director of Calnea Analytics, the consultancy that compiles the Land Registry and other indices (though not the Nationwide and Halifax offerings), said the discrepancies were worrying.

“It doesn’t seem to add up,” he said. “Even when data are adjusted to take time lags into account, the data do not match.

“With the current trajectory, I don’t see us catching up within three months,” Mr Lim added.

The Land Registry measures prices after the transactions are completed, whereas the Halifax and Nationwide survey prices when mortgages are approved.

Moreover, transactions may not be reported to the Land Registry for as long as three months after completion. That means there may be a lag until transactions are reflected in its survey, compared to the ones produced by the lenders.

In the statistical argument about which index to rely on, economists point out that lenders’ surveys have track records going back several decades and tell roughly the same story, adding to their credibility.

Both indices are based on similar methods, but use slightly different ways to transform the raw figures into indices intended to give a true picture of the market.

The advantage of the Land Registry data is that is is based on actual, completed transactions. However, it is a relatively small part of the total UK housing stock, as it only records houses that have changed hands at least once already since 2000.

Only 2 per cent of the nation’s housing stock turns over in an average year, a figure which is currently likely to be even lower.

Mr Lim said that current smaller number of transactions may be the single most significant variable. “This causes any biases to be exaggerated,” he said.

According to the latest data, the average price of a house in England and Wales stood at £178,364. Among property types, detached houses showed the biggest year-on-year drop, falling 2.3 per cent from July 2007.

In London, house prices are continuing to rise, albeit at a slower pace than before. London prices stood 1.7 per cent higher than those achieved a year ago.

The biggest year-on-year declines in English house prices were 5.1 per cent in the East Midlands and 3.8 per cent in the West Midlands. In Wales, house prices dropped by 4.4 per cent.